A study investigated the effect of cultural background on reading comprehension, specifically examining content knowledge (schemata) and overall familiarity with the setting. It tested the hypothesis that when a setting is familiar to readers, the text will be most readable, and will yield the shortest time to read, the best comprehension, and the greatest identification with the text. Subjects were two groups of full-time students enrolled in a large Midwestern university: a native English-speaking group (18 students), and a native Japanese group (18 students). Subjects read texts from the two cultures and from a third, presumably neutral, culture. Each of the texts was systematically modified to create three versions, one for each of the three cultural settings. Results indicated that cultural setting affected the American students to a much greater degree than it did the Japanese students. Japanese students were less affected by shifts in either the cultural basis of the narratives they read or the surface clues as to cultural setting. The neutral setting with phonologically simple names clearly affected comprehension. Overall, results of the analyses support, with minor modification, the primacy of cultural effects on comprehension. The minor modification seems to be that when students spend considerable time in another culture, they seem to develop greater flexibility in adapting to cultural variation. (Four tables of data are included. Samples of texts used, text transformations, and excerpts from the reading materials are attached.) (MG)